2018-00232529-CU-WT

Dorothy K. Mathena vs. Nickolaus C. Worthington

Nature of Proceeding: Hearing on Demurrer to the 2nd Amended Complaint

Filed By: Sachs, Derek S.

Defendants Worthington Oil & Gas Corporation (“WOG”), Big W Ranch Corp., and Worthington Ford, Inc.’s demurrer to the seventh cause of action in Plaintiff Dorothy Mathena’s second amended complaint (“SAC”) is ruled upon as follows.

This matter was continued from December 17, 2018 to allow Defendants to comply with CCP § 430.41. They have now done so.

In this action Plaintiff alleges numerous causes of action against Defendant, including the Seventh Cause of Action for Wrongful Termination in Violation of Public Policy which is the subject of the instant demurrer.

Plaintiff alleges that she began working for Cal Worthington as the business manager of the Worthington Dealership in Sacramento in 1987. (SAC ¶ 12.) She alleges that in 1991 she was moved to the corporate offices and worked with WOG’s chief financial officer and under Cal Worthington’s personal supervision until she retired in 2006. (Id.) In April 2007, Cal Worthington allegedly called Plaintiff and asked her to return as a consultant and work for WOG and take charge of the accounting functions of the corporate offices. (Id. ¶ 14.) Plaintiff entered into an employment agreement in June 2007 whereby she would work for Cal Worthington and assist him in moving his corporate offices from Roseville to Orland. (Id. ¶ 15.) At the time Cal Worthington died in 2013, Plaintiff had been appointed as Secretary and CFO of all companies owned by the 2011 Amended and Restated Cal Worthington Trust Agreement (“Trust”). Plaintiff was an outside successor co-trustee of the Trust.

During 2016 and 2017 Plaintiff began questioning the financial status and management of Worthington Ford, Inc. (Id. ¶ 26.) In July 2017, Nickolaus Worthington, a co-trustee of the Trust and CEO of WOG and Worthington Ford, Inc., notified Plaintiff that her oversight of two dealerships had been reassigned. (Id. ¶ 27.) Plaintiff requested a meeting to discuss the matter and at the meeting was allegedly told by Nickolaus Worthington without explanation that she either resign or get fired. (Id. ¶ 28.) She alleges that she told him that he did not have the authority to fire her but that she was forced to resign as the CFO and as Secretary of WOG and accept a consulting agreement with WOG. (Id. ¶ 29.) She alleges that the consulting agreement provided that she could only be terminated if she took action contrary to the benefit of WOG, chooses to resign, or refuses to assist WOG when called upon. (Id. ¶ 31.) She alleges that in October 2017, while visiting Big W. Ranch to finish a project she received a call from Nickolaus Worthington who told her to leave in a threatening voice and that she was denied all access to financial records of companies managed by the Trust and prevented from carrying out her duties. (Id. ¶ 32.) She alleges that she was informed on October 31, 2017 that she had been removed as an Outside Successor Co-Trustee. (Id. ¶ 33.) She alleges that she was falsely accused of engaging in fraudulent behavior, lying to the family and other trustees about company financial matters and used her position for personal benefit. (Id. ¶ 34.)

The pleading rules applicable to demurrers are now familiar and well established. Pleadings are to be liberally construed. (Code Civ. Proc. § 452) A demurrer admits the truth of all material facts properly pled and the sole issue raised by a general demurrer is whether the facts pled state a valid cause of action – not whether they are true. ( Serrano v. Priest (1971) 5 Cal. 3d 584, 591.)

A demurrer may be sustained only if the complaint lacks any sufficient allegations to entitle the plaintiff to relief. (Financial Corp. of America v. Wilburn (1987) 189 Cal. App. 3d 764, 778.) “Plaintiff need only plead facts showing that he may be entitled to some relief . . . , we are not concerned with plaintiff’s possible inability or difficulty in proving the allegations of the complaint.” (Highlanders, Inc. v. Olsan (1978) 77 Cal. App. 3d 690, 696-697.) “[Courts] are required to construe the complaint liberally to determine

whether a cause of action has been stated, given the assumed truth of the facts pleaded.” (Picton v. Anderson Union High School Dist. (1996) 50 Cal. App. 4th 726.)

Defendants demur to the seventh cause of action for Wrongful Termination in Violation of Public Policy. The Court previously sustained Defendants’ demurrer to this cause of action with leave to amend on the basis that Plaintiff’s allegations rested solely on her employment and her resulting termination and did not set forth any public policy violation.

A cause of action for “Wrongful Termination in Violation of Public Policy” is a common law, judicially-created tort claim pursuant to Tameny v. Atlantic Richfield Co . (1980) 27 Cal.3d 167, 176-178.) In order to establish a wrongful termination (“Tameny”) claim, Plaintiff must show an employer-employee relationship, Defendant discharged her, a violation of public policy, a causal link between the adverse employment action and the public policy violation, and damages. (Haney v. Aramark Uniform Servs. Inc. (2004) 121 Cal.App.4th 623, 641.) The public policy alleged to have been violated must be “public in that it affects society at large rather than the individual, must have been articulated at the time of discharge, and must be fundamental and substantial.” (Green v. Ralee Engineering Co. (1998) 19 Cal.4th 66, 76 [citations omitted].) Employees “must show that the important public interests they seek to protect are ‘tethered to fundamental policies that are delineated in constitutional or statutory provisions’ or administrative regulations. (Id. at 71-72.)

Defendants argue that the cause of action fails because her allegations of wrongful termination stem from her role as trustee and not as her role as an employee and thus cannot support a wrongful termination cause of action. The Court disagrees. It is true that the SAC contains allegations that she was improperly removed as an Outside Successor Trustee of the Trust. However, as set forth above, she alleged that in September 2017, Nickolaus Worthington demanded that she resign or get fired from her position as CFO and Secretary of all companies owned by the Trust and that she agreed to resign but only with respect to WOG. She then alleged that weeks later Mr. Worthington told her she was not wanted or needed and that she was thereafter denied access to financial records and was prevented from carrying out her duties as CFO of the companies managed by the Trust. (SAC ¶¶ 32, 33, 94, 97.) Parenthetically, the Court would note that a constructive discharge occurs when an employer’s conduct effectively forces the employee to resign. Turner v. Anheuser-Busch. Inc. (1994) 7 Cal. App. 4lh 1238, 1244-1245. “The conditions giving rise to the resignation must be sufficiently extraordinary and egregious to overcome the normal motivation of a competent, diligent and reasonable employee to remain on the job to earn a livelihood and to serve his or her employer.” Id. al 1246. In any event, Defendants contend that Plaintiff’s allegations that giving up financial oversight would have breached her fiduciary duty to the Trust would require an analysis of the Probate Code not an analysis of her employment relationship. Plaintiff also alleged that she owed a fiduciary duty as the CFO not to delegate to others the unsupervised performance of her oversight services over the companies owned by the Trust. This does implicate and involve Plaintiff’s employment relationship and not simply her duties as a trustee. Defendants cannot demurrer to only a portion of the cause of action. Indeed, “a demurrer cannot rightfully be sustained to a part of a cause of action or to a particular type of damage or remedy.” (Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047.) While Plaintiff also alleges that she was improperly removed as a trustee from the Trust and that she refused to delegate financial oversight of the companies to the other trustees, the

Seventh Cause of Action, liberally construed is premised, at least in part, on the contention that she was improperly terminated from her position as CFO of the companies.

Defendants next argue that Plaintiff has failed to set forth a public policy in support of her wrongful termination claim. To that end they argue that Plaintiff has only alleged that Defendants’ demands that she resign would have violated her fiduciary duties as a trustee which do not constitute public policy violations. As set forth above, the Court disagrees that the cause of action is strictly premised on Plaintiff’s status as a trustee and a potential breach of her fiduciary duties as a trustee. Nevertheless, the Court concludes that Plaintiff has not adequately alleged a public policy to support her wrongful termination claim. “In Gantt v. Sentry Insurance, supra, 1 Cal.4th 1083, the Supreme Court described ‘four categories of employee conduct subject to protection under a claim of wrongful discharge in violation of fundamental public policy: ‘(1) refusing to violate a statute; (2) performing a statutory obligation; (3) exercising a statutory right or privilege; and (4) reporting an alleged violation of a statute of public importance. [citations omitted].” (Casella v. SouthWest Dealer Services, Inc. (2007) 157 Cal.App.4th 1127, 1139.) “With regard to the requisite policy underlying a wrongful termination in violation of public policy claim, the Supreme Court ‘established a set of requirements that a policy must satisfy to support a tortious discharge claim. First, the policy must be supported by either constitutional or statutory provisions. Second, the policy must be ‘public’ in the sense that it ‘inures to the benefit of the public’ rather than serving the interests of merely the individual. Third, the policy must have been articulated at the time of the discharge. Fourth, the policy must be ‘fundamental’ and ‘substantial.’” (Id. at 1139-1140.)

Here Plaintiff’s wrongful termination is not entirely clear as to what public policy is implicated. Plaintiff alleges that she believed that Nickolaus Worthington and David Karalis’ actions in demanding her resignation were based on their efforts to cover up hundreds of thousands of dollars in losses in the Worthington Ford dealership and the mismanagement of the dealership which had reduced the value of the dealership by more than 50%. (SAC ¶ 97.) She alleges that she had fiduciary duties as a CFO and Trustee which precluded her from delegating her oversight duties and that a breach of her fiduciary duty as a Trustee could be characterized as a criminal act whose violation is enforceable by the DA. (SAC ¶ 96.) These allegations are not sufficient to articulate the requisite fundamental public policy of this state. While the Attorney General may bring enforcement actions for certain trusts, this is limited to charitable trusts which benefit the public at large. (Holt v. College of Osteopathic Physicians & Surgeons (1964) 61 Cal.2d 750, 753-754.) But here, the Trust at issue is not alleged to be a charitable trust and thus it does not benefit the public at large. Further, actions regarding charitable trusts are civil actions, not criminal. (Gov’t Code § 12591.1.)

In opposition Plaintiff argues that her refusal to relinquish her oversight of the companies “implicates or encompasses potential statutes proscribing embezzlement (Penal Code § 504), theft (Penal Code §§ 484, 487), fraud (Civil Code §§ 1572, 1709) and, upon reflection even tax evasion (Rev. & Tax. Code § 7152; 26 U.S.C. §§ 7201, 7202).” (Opp. 5:17-21.) However, other than generally referring to fraud in the SAC, none of these statutes are even referred to in the SAC and cannot support a wrongful termination claim. Moreover, the cases cited by Plaintiff to support her proposition that her suspicions of criminal conduct are sufficient to support a public policy tethered to a statutory provision are inapposite. Yau v. Allen (2014) 229 Cal.App.4th 144 involved a situation where an employee alleged that he was terminated after complaining about

fraudulent warranty claims in violation of public policy tethered to statutes proscribing theft and fraud. The employee specifically alleged the Penal Code statutes and the Civil Code statutes setting forth the public policy. Plaintiff has not done so here. More fundamentally, in Yau, the public interest was implicated because a third party was potentially harmed (the entity to whom the fraudulent claims were submitted) and there is a “fundamental public interest in a workplace free from crime.” (Id. at 159.) Collier v. Superior Court (228 Cal.App.3d 1120, involved an employee’s report that other employees were engaged in illegal conduct which may have violated laws against bribery, kickbacks, embezzlement, tax evasion and even drug trafficking and money laundering. But here, again, the SAC does not contain any reference to any statute pursuant to which a public policy could be tethered, nor can any such conduct prohibited by the statutes referred to Plaintiff in her opposition be inferred. Indeed, with respect to the alleged misconduct which Plaintiff attempts to tether her wrongful termination to, Plaintiff only alleges that Nickolaus Worthington and David Karalis’ demanded she resign to cover up hundreds of thousands of dollars in losses in the Worthington Ford dealership and mismanagement of the dealership. (SAC ¶ 97.) There are no facts from which the Court could infer that Defendants were seeking to get Plaintiff to resign because she raised suspicions of criminal conduct proscribed by statute or because she refused to participate in criminal conduct. There are no allegations that these losses and/or mismanagement involved any wrongful conduct. As currently alleged, Plaintiff has not set forth any public policy sufficient to support her cause of action for wrongful termination in violation of public policy.

The demurrer is sustained with leave to amend. Although the Court previously gave Plaintiff leave to amend, it is not yet convinced that Plaintiff will be unable to allege a wrongful termination cause of action.

Plaintiff may file and serve an amended complaint no later than January 29, 2019. Defendants shall file and serve their response within 30 days thereafter, 35 days if the amended complaint is served by mail as modified by the CCP § 430.41 extension as necessary.

The notice of motion does not provide notice of the Court’s tentative ruling system as required by Local Rule 1.06(D). Defendants’ counsel is ordered to notify Plaintiff’s counsel immediately of the tentative ruling system and to be available at the hearing, in person or by telephone, in the event Plaintiff’s counsel appears without following the procedures set forth in Local Rule 1.06(B).

The minute order is effective immediately. No formal order pursuant to CRC rule 3.1312 or other notice is required.